May 27, 2016
By Steven Wishnia
New York, NY – New York State Attorney General Eric T. Schneiderman announced a lawsuit against Domino’s Pizza and three of its franchisees May 24, charging that they cheated workers at 10 stores out of more than $565,000 in pay.
The suit seeks to have a court order an accounting to determine how much back pay and damages are owed to the workers, to have a monitor ensure Domino’s is complying with wage and hour laws, and to rule that the company is a “joint employer” of workers at stores it franchises, and therefore responsible for wage theft and other illegal practices at them. While the Attorney General in 2014 and 2015won $1.5 million for Domino’s workers in settlements with franchisees owning 61 stores, this is the first case in which it has alleged that a fast-food corporation is liable as a joint employer for labor violations at its franchises, Schneiderman’s office said in a statement.
The suit argues that Domino’s should be considered a joint employer because of the way it controlled details of its franchisees’ businesses, including fraudulently requiring that they pay it to use a computer-payroll system called PULSE that it knew underpaid workers.
“At some point, a company has to take responsibility for its actions and for its workers’ well-being. We’ve found rampant wage violations at Domino’s franchise stores,” Schneiderman said in the statement. “And, as our suit alleges, we’ve discovered that Domino’s headquarters was intensely involved in store operations, and even caused many of these violations.”
“We were disappointed to learn that the attorney general chose to file a lawsuit that disregards the nature of franchising and demeans the role of small-business owners instead of focusing on solutions that could have actually helped the individuals those small businesses employ,” Domino’s responded in a statement.
Based on its reviews of Domino’s internal documents, the Attorney General’s office said, it found that almost 80% of the franchisee-owned stores it probed had paid workers less than the minimum wage, and 85% had failed to pay them legal overtime rates. Domino’s has 190 stores in New York State, out of which 136 are franchised.
The suit alleges that the PULSE system cheats workers out of overtime pay by not combining hours worked at different stores in the same week; “calculates overtime at an illegally low rate for tipped workers”; and calculates their pay at the lower wage for tipped work even when they are doing non-tipped work such as making pizzas. It says Domino’s has known about these flaws since at least 2010, but failed to inform franchisees of them.
Key to the suit is having Domino’s held to be a joint employer, as fast-food companies commonly claim they are not responsible for working conditions at their restaurants because the workers are employed by their independent franchisees, not them. “Domino’s is also liable as an employer because of its unusually high level of control over employee conditions at its franchisee stores and its role in causing the wage violations,” the suit says.
That control, the suit says, includes micromanagement down to the level of ordering franchisees to discipline or fire specific employees, and dictating store hours and staffing and scheduling requirements. Domino’s keeps records on all franchisee workers, including monitoring how fast they take orders and deliver pizzas. Its dress code specifies the maximum diameter of earrings workers can wear, what colors of socks and undershirts are permissible, and forbids visible tattoos unless they’re military. The company also actively campaigns against labor unions at its franchisees.
“When franchisees report union activity to the company, Domino’s imposes its own view of management-employee relations on its franchisees by providing ‘union avoidance’ literature to the franchisees and has sent Domino’s officials on site to thwart any such organizing campaign,” the suit charges.
The three franchisees named in the lawsuit are Anthony Maestri, who currently owns and operates three Domino’s in Manhattan and Westchester County, and until November 2013 had six; Schueb Ahmed, who owns one in Manhattan and one in Nassau County; and Matthew Denman, who has stores in Amsterdam and Gloversville, northwest of Albany.